Kelham Island itself is one of the oldest industrial sites in Sheffield. The island was first formed in the 1100s when the goit, or mill stream, was created alongside the lane leading to where the museum stands today. This stream was diverted to provide water to the Town Corn Mill, which was located near Lady's Bridge.
There are no further records of the site until the appearance of the town armourer in 1637. He owned a workshop and the second waterwheel on the island, and his name was Kellam Homer. By 1674, this second wheel was known as Kellam Wheel. The spelling of Kellam had been altered to Kelham by the early 1800s and the island had been given the same name.
Industries sprang up in the early 1800s in the Kelham area. Kelham Island itself became a host for all kinds of manufacturers. In 1829, John Crowley bought land on the island and built a small iron foundry called Kelham Iron Works. He made all kinds of iron products - bicycles, corn grinders, lawn mowers, as well as decorative iron works. His business was so successful that he acquired larger premises at Meadow Hall in 1870. The Kelham Iron Works continued until the 1890s when the site was bought by the City.
Crowley's old foundry buildings were demolished and in their place an electricity generating station was built, solely to provide power for the City's new trams. The power station was in operation until the 1930s, and the buildings were used thereafter as storage space and workshops. These buildings now house the collections, displays and workshops of Kelham Island Museum.